Canadian Dollar Update June 26, 2019 – Canadian Dollar rises with crude

USD/CAD Open: 1.3157-1.3158 Overnight Range: 1.3142-1.3196

Oil is at $59.46 and gold is at $1,410. US markets are mixed today.

The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3184. Support is at 1.3130.

The Canadian dollar is probing resistance in the USDCAD 1.3120-50 zone, in part due to another rise in crude oil prices. West Texas Intermediate (WTI) jumped from $57.76/barrel yesterday to $59.10 in Asia, after the American Petroleum Institute reported US crude inventories fell 7.5 million barrels in the week ending June 21. The drop in US supplies combined with fears of a massive supply disruption from an escalation of US/Iran tensions fueled the rally. Prices are also supported by expectations that OPEC and Russia will extend oil production cuts until the end of the year.

The rise in oil prices undermined the Canadian dollar, but so did US/China trade talk news. Treasury Secretary, Stephen Mnuchin, interviewed on CNBC, said: “we are 90% of the way there”. He believes that President Trump and President Xi Jinping will re-start the stalled talks.

The US/China trade war was one of the reasons cited by the Reserve Bank of New Zealand in their monetary policy statement, last night. The RBNZ left their Overnight Cash Rate (OCR) unchanged at 1.5% but warned: “the weaker global economic outlook and the risk of ongoing subdued domestic growth, a lower OCR may be needed over time to continue to meet our objectives”. The dovish statement was expected.

The improved tone to the China/US trade talks boosted the New Zealand, Australian and Canadian dollars.

The US dollar was in demand in Asia after St Louis Fed President, James Bullard, said that he thought cutting US interest rates by 50 basis points this year would be overdoing things. Trader’s viewed his comment as a less dovish policy stance and bought US dollars.

USDJPY rallied on a modest increase in US Treasury yields and because of the improved trade rhetoric.

In Europe, EURUSD trading was subdued and rangebound. The single currency is supported by minor risk aversion demand due to Iran/US tensions but weighed down by the dovish European Central Bank outlook.

Sterling traders have been busy. GBPUSD has chopped about in a 1.2664-1.2704. range. Bank of England Governor, Mark Carney, caused a bit of chop in his remarks to the UK parliament. Mr. Carney told lawmakers that market expectations of a no-deal Brexit had risen substantially over the past few months. The statement should not have surprised anyone, but GBPUSD bounced erratically, anyway.

Fed Chair Jerome Powell’s speech yesterday didn’t provide any new insight to Fed policy. He repeated that the Fed was “closely monitoring conditions”.

China took another shot at Canada yesterday. They have stopped imports of Canadian meat because of “falsified documents”. Canadian officials haven’t responded.